2004 (12) TMI 651 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutionality of the Haryana General Sales Tax (Amendment) Act, 2003 and Haryana Value Added Tax (Amendment) Act, 2004.
2. Entitlement of the petitioners to a refund of the tax collected under the Haryana General Sales Tax Act, 1973 on paddy purchased up to March 31, 1991.
3. Legislative power to nullify the judgment of the Supreme Court.
4. Validity of retrospective amendments to tax laws.
5. Violation of Article 14 of the Constitution of India by the impugned amendments.

Analysis:

Constitutionality of the Haryana General Sales Tax (Amendment) Act, 2003 and Haryana Value Added Tax (Amendment) Act, 2004:
The court examined the amendments brought by Haryana Act No. 4 of 2003 and Haryana Act No. 4 of 2004, which aimed to validate the levy of purchase tax on paddy retrospectively from April 1, 1981. The court found that the amendments sought to nullify the judgment of the Supreme Court in Satnam Overseas (Export) v. State of Haryana, which had declared the levy of purchase tax on paddy up to March 31, 1991, as illegal. The amendments did not remove the statutory basis of the Supreme Court's decision, specifically section 9(1)(b) of the Haryana Sales Tax Act, which provided exemption from levy of tax on the purchase of paddy. Therefore, the court held that the validation clause in the amendments was ultra vires to the legislative power of the State.

Entitlement to Refund:
The petitioners sought a refund of the tax collected on paddy purchased during the assessment years 1982-83 to 1992-93. The Supreme Court had directed the refund of such taxes, and the Excise and Taxation Officer had accepted the claim and ordered the refund. However, the refund was withheld due to the amendments. The court upheld the petitioners' entitlement to the refund, quashing the demand notices issued under the amended Acts.

Legislative Power to Nullify Judicial Decisions:
The court emphasized that while the Legislature has the power to enact laws with retrospective effect, this power cannot be used to nullify judicial decisions without removing the statutory basis of the decision. The amendments attempted to override the Supreme Court's judgment without amending the scheme of the Haryana Sales Tax Act or deleting section 9(1)(b). Hence, the amendments were deemed an impermissible legislative exercise.

Validity of Retrospective Amendments:
The court acknowledged that the Legislature can enact laws retrospectively but highlighted that such laws must be reasonable and not arbitrary. The retrospective amendments in this case were found to be unreasonable as they sought to validate an illegal levy of tax without addressing the underlying statutory provisions that provided exemptions.

Violation of Article 14:
The court found the amendments to be violative of Article 14 of the Constitution, as they were arbitrary and sought to give excessive retrospectivity to the levy of purchase tax. The amendments aimed to validate the levy of purchase tax on paddy while section 9(1)(b) providing exemptions remained on the statute book.

Conclusion:
The court declared the Haryana General Sales Tax (Amendment) Act, 2003, and the corresponding amendment in the Haryana Value Added Tax (Amendment) Act, 2004, ultra vires to the legislative power of the State. The demand notices issued under these amendments were quashed. The court clarified that the State could still take appropriate legal measures regarding the refund of purchase tax levied and collected before April 1, 1991. The writ petitions were allowed.

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